SBA 7(a) Acquisition Calculator

Buying an existing business with an SBA 7(a) loan is one of the few ways an ordinary person can acquire a million-dollar company without a million dollars in the bank. The program exists precisely to make that possible. But the financing only works if the deal is stacked correctly, and the rules about who puts in what are stricter than most first-time buyers expect. Get the structure right and the bank says yes. Get it wrong and the same deal dies in underwriting, even when the business is sound.

The three sources that fund the purchase

Almost every 7(a) acquisition is paid for by three parties, and together they have to add up to the full price. The bank provides the largest piece, the SBA-guaranteed loan, often around 80% of the deal. The buyer brings cash, the equity injection that proves they have skin in the game. And the seller frequently carries a note for part of the price, agreeing to be paid over time rather than all at closing. Bank, buyer, seller. When you enter the numbers here, the first thing the tool checks is whether those three sources actually sum to the purchase price, because a structure that does not balance is not a structure at all.

The 10% rule, and why it is really a 5% rule

This is the part that trips people up, so it is worth slowing down. The SBA requires a minimum equity injection of 10% of the total project cost on a change-of-ownership loan. That much is well known. What fewer buyers realize is how that 10% can be assembled. At least half of it, a full 5% of the price, has to be the buyer's own cash. It cannot be borrowed, and it cannot come from the seller. The other 5% can come from a seller note, but only if that note is locked down in a specific way.

So a buyer who hoped to put in nothing and have the seller carry the whole down payment runs straight into a wall. The bank will not close it. The minimum real cash from the buyer's pocket is five cents on every dollar of purchase price, and many lenders ask for more.

Why standby is the magic word

A seller note only counts toward the equity injection if it is on full standby. Full standby means the seller agrees to receive no payments at all, not principal and not interest, for a set period, usually the first two years and sometimes the entire life of the loan. The logic is straightforward once you see it: a note that demands monthly payments is just more debt competing for the business's cash flow, but a note that sits silent for two years behaves like equity. It is patient money. That patience is what lets the SBA treat it as part of the buyer's injection rather than as another loan stacked on top.

This is why the standby question on this calculator changes the result so much. Mark the seller note as full standby and it can help satisfy the equity requirement. Mark it as a note that pays from day one and the tool stops counting it as equity entirely, because the SBA would too. Same dollar amount, completely different treatment, decided by a single clause in the note.

Coverage: can the business actually carry the loan?

Meeting the equity rule gets you in the door, but the deal still has to prove it can pay for itself. That is what debt service coverage measures. You take the business's adjusted annual cash flow and divide it by the annual loan payment.

Lenders want this comfortably above 1.0, typically at least 1.15 to 1.25, because a ratio of exactly 1.0 means every dollar the business earns goes straight to the bank with nothing left for surprises. One important adjustment trips up new buyers: the cash flow you run through this ratio should already have the new owner's fair market salary subtracted. If you are going to draw a living from the business, that draw is not available to service debt, and the lender will underwrite it that way. Enter the cash flow after your own reasonable pay, and the coverage number you see here will track what the bank calculates.

Reading the structure analysis

The leverage bar shows the three sources as shares of the purchase price, so you can see at a glance how much of the deal is bank debt versus your cash versus seller paper. The equity indicator tells you whether the structure clears the SBA injection rules, treating the seller note correctly based on the standby answer you gave. And the coverage figure tells you whether the cash flow supports the payment. A deal needs all three to line up. Plenty of structures satisfy the equity rule but choke on coverage, or cover comfortably but leave the buyer short on the cash injection. The point of planning the structure before you make an offer is to find those problems on a screen instead of in underwriting.